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Advancing an ambitious reform agenda, the six Western Balkan (WB6) economies have emerged over the last two decades as a group of small but growing open economies that are improving business conditions and attracting investment. Since 2000, reforms have contributed to a doubling of the region’s GDP and a six-fold increase in export volumes.
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Over the past two decades, the six Western Balkan (WB6) economies have implemented a number of economic reforms that have strengthened their competitiveness; however, 2020 has confronted them with unprecedented challenges. The COVID-19 pandemic has taken a heavy toll on the region, with gross domestic product contracting by 3.3%, exacerbating existing structural challenges and bringing new ones to the fore. The pandemic has revealed the need to reorient the region’s reform priorities towards a stronger focus on sustainability, inclusiveness and citizen well-being. Against this backdrop, a holistic, evidence-based structural reform agenda that outlines a path to sustainable, inclusive growth and rising living standards is of utmost importance for all WB6 economies.
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The Western Balkan region consists of six small open economies: Albania, Bosnia and Herzegovina, Kosovo, Montenegro, North Macedonia and Serbia. In the post-transition period, the economies of this region have become predominantly service-oriented, though some manufacturing sectors have been expanding in recent years. Services account for the largest share of the regional gross domestic product (GDP) at 52.2%, dominated by wholesale and retail trade (World Bank, 2021[1]). In Montenegro and Albania, tourism also contributes a significant share to the services sector (32.1% and 21.2% of GDP respectively) (World Travel and Tourism Council, 2020[2]). Industry contributes 23.4% to GDP, with the highest contribution coming from the manufacturing and construction sectors. However, the share of the manufacturing sector varies across the six economies – from 4% of GDP in Montenegro and 6% of GDP in Albania to between 12% and 14% in the remaining four economies (World Bank, 2021[1]). The agriculture sector has declined significantly over the past two decades, its contribution to GDP having fallen from 15.3% in 2000 to 8.6% in 2020 (World Bank, 2021[1]). However, this sector’s contribution to employment remains much more significant, at 18.6% in 2019 (World Bank, 2021[1]). Its contribution to informal employment is also likely to be significant (ILO, 2021[3]).
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This chapter provides an overview of the key findings of the Competitiveness Outlook 2021 for each of the 16 policy dimensions covered in the assessment, as well as the complete scores for each dimension, sub-dimension and qualitative indicator. Full details of the methodology and the background to this assessment are contained in the Assessment methodology and process chapter.
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The governance structure of Bosnia and Herzegovina (BiH) is highly decentralised, comprising the state-level institutions of Bosnia and Herzegovina, the governments of the two entities – the Federation of Bosnia and Herzegovina (FBiH) and the Republika Srpska (RS) – as well as the autonomous Brčko District. The FBiH and the RS have significant constitutional autonomy and responsibility for the matters which the Constitution of Bosnia and Herzegovina has not assigned to the state-level government. Paragraph (3) of Article III of the Constitution of Bosnia and Herzegovina stipulates that all government competences not expressly assigned to the state-level government belong to the entities. The entities have jurisdiction over a range of policies including health care, education, agriculture, culture, labour, police and internal affairs. Both entities have a president, prime minister and their own governments. The FBiH is furthermore divided into ten federal units (cantons), each with its own government and constitution that defines the institutions and functioning of government authorities.